General Mills can proceed with $6.1 billion deal to buy Pillsbury

Associated Press

WASHINGTON — A business marriage of the Pillsbury Doughboy and Betty Crocker moved ahead Tuesday when the Federal Trade Commission deadlocked on approving General Mills Inc.’s $6.1 billion purchase of Pillsbury Co.

The vote was 2-2, but without a majority vote against the merger, the deal can continue, said William Kovacic, the commission’s general counsel.

The purchase of Pillsbury from Diageo PLC, a London-based food and drinks conglomerate, creates the world’s fifth-largest packaged food company. Under the deal, General Mills will assume $5.3 billion in debt.

Pillsbury, symbolized worldwide by the Pillsbury Doughboy, is the No. 1 producer of refrigerated doughs in the United States. It also makes Green Giant vegetables, Haagen-Dazs ice cream, Old El Paso Mexican foods and Progresso soups.

General Mills is the nation’s No. 1 cereal maker, including Cheerios, Lucky Charms, Trix and Wheaties. It also makes Yoplait and Columbo yogurt, Betty Crocker dessert mixes, Hamburger Helper, Bisquik and snacks such as Chex Mix and Pop Secret popcorn.

Under the deal, General Mills would nearly double its annual sales to about $13 billion, but still would be dwarfed by Nestle SA, which at $50 billion is the packaged food industry’s largest company.

Shares of General Mills closed Tuesday up 5 cents to $43.20 in trading on the New York Stock Exchange. U.S. shares of Diageo fell $1 to $39.20 in trading on the New York Stock Exchange.

"The Pillsbury brands really take General Mills into other areas of the grocery store," said Leonard Teitlebaum, a food analyst with Merrill Lynch &Co. in New York. "General Mills is a renowned marketing company, arguably the best in the food business."

General Mills announced the merger in July 2000. Last February, to alleviate antitrust objections, it said it would sell Pillsbury dessert and specialty products and Hungry Jack potato mixes, and its own Robin Hood flour business to International Multifoods Corp. for $305 million.

General Mills and Pillsbury both started in the flour-milling business in Minneapolis in the 1860s. Pillsbury now employs around 20,000 people, and General Mills about 11,000. Job losses are likely because both maintain headquarters in the Twin Cities area.

"For some families, one family member works for General Mills and another one works for Pillsbury," Teitlebaum said.